In a male-dominated VC environment, the gender investment gap is real. And it penalizes not only women entrepreneurs, but also VCs, as women founders ultimately deliver higher value than their male peers.

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Erica Santoni, Erica is an MBA candidate at Harvard Business School. Passionate about gender equality, she is on a journey to promote women empowerment in the workplace.

In the last few days, I have received a number hints from the world around me to write about women entrepreneurs, and so here I am.

I recently went out to dinner with a friend of mine, who enthusiastically told me about her experience at BBG Ventures (where BBG stands for Built Buy Girls — love it!), an early stage fund focused on consumer internet and mobile startups with at least one female founder.

Few days ago, we hosted at Catalyst a networking event for HBS female students and alumnae, and we had Ilene H. Lang, MBA ’73, Catalyst Interim President and CEO, speaking about the origin of the company. Catalyst was founded in the 60s by a Harvard Business School (HBS) alumna, and it pioneered gender equality work for companies!

Speaking of HBS women founders, I have recently been at an event organized by the HBS Women’s Association of Greater New York (HBSWANY) where I enjoyed a great sunset view of NYC with friends while learning about the most recent women-founded HBS startups. The one I enjoyed the most was Kindbody(Gina Bartasi), which focuses on fertility and offers a number of services (from ovarian reserve testing to egg-freezing).

With my HBS friends — one of them is working at another women-founded startup, Thrive Global, the latest initiative of Arianna Huffington!

According to BCG research, women receive less than half of their male counterparts, but deliver more than twice as much per dollar invested!

The investment gap is real — but why so? Women entrepreneurs are affected by stereotyping, biases, and other gender-related dynamics, to the point of being highly penalized when it comes to raising capital from VCs.

BCG identifies 3 key gendered patterns at the basis of the investment gap.

1. Venture Capitalists, who are mainly men, challenge women founders much more than men founders

In an enlightening research written by my HBS Professor Paul Gompers (Diversity in Innovation), it is shown how in the last quarter of a century (from 1990 to 2016) women have been less than 10% of the venture capital (VC) labor pool! This means that in 90% of cases women entrepreneurs pitch to men, who on average appear to have unconscious biases towards women.

According to BCG research, more women than men are asked during their presentations to establish that they understand basic technical knowledge.

“When I pitch with [my male co-founder], they always assume he knows the technology, so they ask him all the technical questions.” – Woman entrepreneur, BCG reseach

2. Male founders are more likely to make bolder projections than women when pitching — and VCs like them better

The person who first explained this to me, quite interestingly from the VC perspective, was Rudina Seseri, Founding and Managing Partner at Glasswing Ventures. She said that when she sits from the other side of the table from entrepreneurs, part of her role is to “translate” their pitches to her male colleagues once the show is over and they have to decide who to invest in. Men entrepreneurs tend to project higher returns: it’s because they are thinking about the best-case scenario. Women instead are much more conservative: they only talk about the results they are 100% sure to achieve.

Rudina Seseri at the dinner we organized for the 2018 Dynamic Women in Business Conference (an annual Conference by the Women’s Student Association of HBS), interviewed by Deborah Singer, General Manager at Girls Who Code Campus

3. Many VCs (again, mostly men) have little familiarity with the products and services that women-founded businesses market

Many women founders come up with new products or services from their personal experiences, to improve the world around them. And men VCs struggle to see the potential in these ideas.

Birchbox CEO and Co-Founder Katia Beauchamp was turned down by many male investors, who would tell her things like “my wife doesn’t use beauty products”, before receiving founding from a women-led VC, Forerunner. According to Katia, men VCs would invest less in businesses that solve women’s problems because they are not able to identify with the final consumer.

“Money is controlled by men in the private and in the public sector and if you are pitching a business towards a female consumer that’s a ding because they are not the consumer.” — Katia Beauchamp, Birchbox CEO and Co-Founder

As women control 85% of purchases, understanding women consumers is crucial. And this is where women-led VCs might have a competitive advantage, thanks to their ability to better connect with the problem the entrepreneur is solving, and to better understand the product.

This is the case of some women-led VCs, such as Female Founders Fund and BBG Venutures, who are betting on women entrepreneurs to build the next generation of market-defining consumer products and services.

With such compelling visions, women-led and women-focused VCs are likely to attract some of the best female talents who are interested in working on solving problems they care about and to contribute to closing the investment gap.

As a conclusion, women entrepreneurs are perceived as less competent, less able to achieve great results, and with lower-value added ideas — mostly because the capital providers are 90% men who struggle to speak the same language as women. Diversity in the VC world is needed as much as it is needed in the entrepreneurial one — only with diversity the best ideas will be pitched and financed.

Erica Santoni, Erica is an MBA candidate at Harvard Business School. Passionate about gender equality, she is on a journey to promote women empowerment in the workplace.

Italian by birth and European at heart, Erica Santoni lived in Milan, Paris and London before moving to Boston in 2017 to attend her MBA at Harvard Business School. She fell in love with gender equality while working at BCG as a management consultant. After HBS, she plans to focus her career on promoting women’s empowerment. This summer she is working at Catalyst in New York, advising organizations on how to become more inclusive and diverse. She loves eating sushi, going to the theater, and - obviously - talking about gender equality.

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